Stagflation risks stacking up as Iran war enters third month
Financial markets are increasingly concerned about stagflation risks as the Iran war enters its third month, with the prolonged closure of the Strait of Hormuz disrupting global energy supplies and driving up prices. While the U.S. faces elevated inflation with limited growth impact, Europe and parts of Asia confront higher recession risks due to energy dependence and tightening financial conditions. Despite a recent equity rally, analysts warn that extended disruptions could push energy-importing economies into recession while inflation remains elevated.
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By Alun John, Yoruk Bahceli and Dhara Ranasinghe LONDON, April 30 (Reuters) - Financial markets are finding it harder to look past the rising economic costs of the Iran war as the continued closure of the Strait of Hormuz prolongs the world’s biggest-ever disruption to energy supplies. Two months into the conflict, the global economy faces a toxic mix of slowing growth and high inflation - stagflation. Even as tech stocks lift world shares, analysts warn that the longer Hormuz remains shut, the greater the recession risk for energy-importing regions. "The probability of a recession in Europe, the UK, and parts of Asia, is higher than is priced into equity markets," said RBC BlueBay’s head of market strategy Mike Bell.
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